Central Banks Take Action to Stabilize Markets by Providing More Liquidity

On Sunday, central banks in the US, Switzerland and elsewhere announced coordinated moves to provide more liquidity to calm markets in the midst of a crisis in depositor confidence in the banking system.

This exceptional measure came shortly after the acquisition of its rival Credit Suisse by the largest bank UBS, as part of a process coordinated by the Swiss government to restore confidence in the banking system. increase the pace of dollar transactions.

The statement said that “these transactions, which have so far been weekly, will become daily from Monday, March 20, 2023 and will remain so until at least the end of April.”

The central banks explained that the “swap line” network is “a liquidity safety net to ease tensions in global financial markets and thus help to alleviate the effects of these tensions on lending to households and companies.”

Markets are under severe pressure following the Silicon Valley bank failure amid fears of a lack of liquidity after raising interest rates as part of efforts to fight inflation.

The Federal Reserve (US central bank) entered into and extended similar agreements in 2020 in the face of the effects of the Corona virus pandemic.

The agreement was concluded between the central banks of Great Britain and Canada, the European Central Bank, Japan, Switzerland and the Federal Reserve System.

Source: AFP

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